Good afternoon
on Friday, we have held our yearly resources conference in Zurich.
Over the years, we have had many excellent companies and projects presenting in Zurich - I think this year has not been any different!
The mood has been pretty positive - metals are doing well, and the outlook is as good as it has not been since 2011 at least. No wonder, that companies have been upbeat on their prospects, and it appeared to me, that investors generally are still relatively cautious - even though the postive macro-outlook seemed also shared by the majority of investors attending.
Panoramic Resources - Peter was in good form and spirit! The impression he gave the audience was, that a decision on starting Savannah again would not be far away! The major impediment I think is, that offtake-agreements are being chased hard by well-known, established industry players, but also by completely new suitors like Tesla. That´s good news - to increase the payability of nickel produced is the easiest way to improve profits. As you probably know, miners of nickel ore are not producing nickel - they produce a nickel concentrate, which is then sold to smelting companies, usually under long term offtake-agreements. Miners are getting paid often on delivery, and the price is tehn being adjusted, depending on the price of nickel, once the refining process is finished, and nickel metal is being sold. Historcially, miners tended to get paid 65-66% of the nickel contained in concentrate - the balance going to the smelters. Also, minerts received something like 50% of the value of other by-products - in the case of PAN, copper and especially cobalt. Peter indicated, that the payability of contained nickel is rising - and elsewhere I have heard, that payability might be as high as high 70ties. The exact details are a big secret, and they never get published....If we are seeing a new pricing regime for nickel concentrate, that would be very bullish for the miners. You can imagine, that a 10% increase of payability for something, on which the margin is say 40%, sees an increase in profitability - ceteris paribus - of 25%. That´s massive! The other leg of an offtake agreement often is a financing: Smelters or other offtakers usually give financing to the producers, to get the deal. PAN did a small capital raising just now ( 1:7 rights issue ending highyl oversubcribed with no shortfall ), which is not sufficient to cover the 40 mill$ needed to bring Savannah back on. I see high chances, that a large chunk of this could be done by an offtaker, potentially seeing PAN going back into production without the need for any more equity. High quality management, relatively long mine-life and sizeable resource - that´s very sexy for battery-type of nickel these days. at some stage, we will see a 1$ share price again, in my opinion!
Perseus - Jeff has been in Zurich a couple of times, and his company has never been in better shape! Edikan has been put on a sound, operational footing ( finally ), while Sissingue is generating a lot of cash from next month on, with very low costs. The risk-profile of PRU has been coming down big time, and if they can get the options exercised ( resulting from last years´s takeover ), they have a good chance of not needing fresh equity to develope Yaoure, which is a large and long-life mine, and gives them the best growth-profile of any established gold miner in Australia. The better gold price is a major positive for PRU, as Edikan will never be a low-cost producer. At current gold prices, company is very good value,. and I think Jeff´s many shareholders in Switzerland agreed with this view.
Finders - Barry Cahill has more work on his hands than he would like with lawyers and consultants, fighting the current bid, whcih expires on the 16th of March and has been pitched at 23ct, which is below the current share price. The takeover is starting to become very dirty - not nice to fight a greedy takeover, backed by Indonesian companies, while having an asset in Indonesia! I am a little worried about this...but then, the stock is way too cheap at the current copper price of around 3.20 US$. The operation is not fully back on yet, following some well-documented problems. I think we might have to wait until April/may to see the mine back in full production. But it has been cash-generating throughout the last few, rather difficult month.. If the world in Indonesia would be the same as elsewhere, the stock would be 35ct. Unfortunately, it´s not ! But i think the discount is way to heavy, and I am still expecting either an increased bid, or big dividends from next year!
Apollo Minerals - the first public presentation of this company, since buying their gold/tungsten asset in Southern France. My Australian consultants tell me, that the gold potential especially is excellent here - and there is little doubt, that the old mine ( closed many years ago, when tungsten was very cheap ) can produce tungsten for many years. But much work to be done here, first! The only is only just starting, which ahs teh advantage for investors of being in here early. But it will take time, and it remains tobe seen, how effective approval processes for modern day mines will be in France. The Ian Middlemas-camp has shown numerous times in the past, that they can spot great assets . At Apollo, some of the groups best and proven people are involved - I am sure, that this is not without any reason! I think we will hear a lot more from them in the second half of this year - good time to accumulate stock quietly!
Osino Resources - very interesting story , run by Namibian-borne Heye Daun, who is a relative of my wife. Heye was number 2 man at Auryx, before that was taken over by B2Gold and develloped into theior seond best asset. he was No1 at Ecuador Gold & Copepr, before thatw as taken over by a Ross Beaty-backed company. This time, Ross Beaty is backing him right at teh start, alongside with some other, highly regarded industry funds. As you can imagine, I am also a shareholder. Osino has consolidated a large ground position surrounding the ex-Auryx mine in Namibia, as well as Navachab, which is an old Anglo Gold mine, now owned by a private group. Both mines have multi-million oz resources and are still producing. Osino has had some promising , early exploration sucess, and is currently very actively exploring. The most senior board member is Dave Hodgson, who has been COO of AngloGold Ashanti for several years. Again, another very proimising story, with many ingredients of a successfull company. Osino will IPO in Canada in the very near future via a backdoor listing, and I think for sizeable investors, there is still the opportunity to be part of it.
Metro Mining - was perhaps the surprise of the day. bauxite seems to be pretty boring for most - but boring can be beautiful, if it generates as much cash as this company will do! There are very few operational risks here - the main risk perhaps being excessive rain, as the project is situated in the very North East of Australia. If you can bring on a project for less than 40 mill$, which will eventually produce 140 mill$ EBIOTDA p.a. for 17 years, something must be easy!!! The NPV10 of the project is more than 50% higher than the current market cap, with offtake agreements in place for a large part of production. Bauxite is not that rare - but Chinese demand is growing, and it´s not cryzy to expect slowly rising prices, especially, as MMI have a big location advantage vs African bauxite. I think this little company could become a big div-stock in 2-3 years time....and tehy could grow production even further, if tehy should be able to increase the resource. This is not a very exiting story, and it does not make you rich - but risks are very low here, and I would not be surprised at all, if these guys will either grow, and/or pay you a 10% dividend in a few years. The company is also not very well know, and production start will be in April, once the rainy season is over - great timing to get set!
Sheffield - sorry, as I drag on in superlatives...mineral sands are not having it easy to catch investors imagination - but this is a world class project in commodities, which have a great future ahead. Very limited supply growth - rather the opposite - as no new mines are coming on stream. Few large producres are controlling the market - do they really want a new, large project to come in stream and compete???? This is not madagscar or elsewhere in Africa - this is Western Australia , and very clsoe to all necessary infrastructure. But Western Australia also has it´s Aboriginals, and a VERY small groupof them are making things currently a little difficult. I ahve no doubt, that these problems will be overcome - I think we are talking 2-3 month at worst. The project has got big backing from WA government, offtakers, credit financiers and Blackrock as major shareholder....Breuce Mcfadzean ahs made us good money as the MD of Catalpa, which became Evolution Mining many years ago. This might be Bruce´s last, big deal - I am backing him - great story and great chance to double your money over the next 12 month or so.
Genex Power - it still is the excellent story it used to be! They are now in full production with the solar plant, giving them more than 1 mill$/month in cash...very safe, long term price guarantee, no operating risk, very little ( if any ) ongoing capex and easy to run. The big price is still the hydro-pumpt plant, 5x bigger than the current solar Stage 1 plant - the former accompanied by an also large, 250 MW solar plant. Both to be financed in conjunction, which has it´s challenges for a small, 90 mill$ company. Major milestones are ahead for this half - a power purchase agreement with a major user, and financing with government funds, supporting renewable. 15 mill outstanding options had an expiry date of 26th of Feb- that´s today. They have pressured the share price this year - but the effects should be gone very soon. Very hard for institutional investors to buy this stock now - but once the two above mentioned steps have substantially derisked the project, I would be surprised not to see an avalanche on insto´s all over this stock. Again - perhaps the last chance in the moment and over the next few weeks to accumulate a position.
Gascoyne - have raised all necessary money to bring their first gold mine into production in May. start-up risks should be evry managable here - a very straightforward project, which will produce nearly 120.000 oz p.a. each year for teh first 2 years, reducing therafter. AISC of 1000 A$/oz are giving them a fantastic margin at today´s gold price of about 1700 A$/oz. The mine life is an issue , keeping larger suitors away. But a large , 70.000m exploration program will be starting in late March. As ususal with small companies, they have not had the funds for a proper exploration effort so far - that has changed with the recent placement at current prices. This will probably not make you rich either - buit 50% upside should be achievable, once in steady state production, and hopefully some good sniffs for additional gold. Risks are very limited...and I like the people behind the company, which always helps!
Graphex Mining - perhaps my personal favourite for anybody liking a punt! Location: bad ( Tanzania ) - resource ( excellent! ) - product ( hard to beat ) - backing ( I think great,but some people don´t like Chinese JV-partners ) - upside ( massive ) - all this makes for a far above average story! Phil Hoskins is a great, relatively young MD, whom I like. China is almost desperate to get it´s hands on his type of graphite, which si needed especially by the building industry as a fire retardent, and which demands a nice price premium. I like, that the product is not really competing with mights Syrah Resources, which might well control the battery grade graphite market in future. But Tanzania remains an issue, until the Chinese, incoming JV-partner is happy with what the Tanzanian government comes up with. Tanzania will ahve 16% of this project for free, tax income, royalty income and new jobs - I think interests are aligned enough for Tanzania to show the world, that the country is still open to foreign investment. Cash is realtively thin for GPX - if this process of government argy-bargy takes much longer, tehy might need a little top-up. The next big positive trigger will be teh announcement of the refined feasibility study, and/or financing from Chinese banks. Both should be done before 30th of June - I hope much earlier.
News from today::
Beadell - signs a 60 Mill US$ credit facility with Sprott. Great news, as tehy probably don´t need an equity raising now...but at a cost: 8% minimum interst, plus 1.5 Mill US$ fee p.a. out of gold production....that makes it more than 10%! But they seem to have a lot fo flexibility with this facility, which is good. Macquarie sees 1100-1200 US$ AISC going forward. While this facility will be relieve for existing shareholders, it does not make the project any better. No reason to be in the stock, unless you are evry bullish for gold!
Newcrest - made a starnge ( in my opinion ) move into Ecuador, by taking 250 mill$ of a 400 mill$ placement in Lundin Gold, giving NCM more than 25% of the company. BUT they have standstill agreement for 8 years - that´s a minority shareholder position for a long time! This is their second inevstment into a minority position in Ecuador - NCM; are alkso the largest shareholder in Solgold. Big bet on the country! Good news probably for Lumina Gold Corp as a large explorer in the country - but not for Newcrest, who are now at the mercy of teh evyr smart Lundin family!
West African Resources - B2Gold, one of the most aquisitive groups in North America, ahve announced an open pit resource of 1.13 million ounces at about 2g open pittable less than 20 km from West African´s asset ....Probably, both projects on a stand-alone basis ( especially their own project! ) are a little small for them...combined, it could be a nice 200-250.000 oz producer for man years to come....I think it would make a lot of sense....it´s completely beyond me, why WAF is trading below 40ct....The corporate game should start in earnest, once the new resource statement is out in late March....and I hope, that WAF does not survive this year as a stand-alone, economic entity...
have a nice evening
WS